(a) The commissioner reserves all authority and discretion to resolve any issues in Texas concerning the proper accounting treatment for an insurance or health plan transaction. When determining the proper accounting treatment for an insurance or health plan transaction, the commissioner, insurers, and health maintenance organizations will refer to the sources in paragraphs (1) - (6) of this subsection in the respective order of priority listed for guidance on how to properly record business transactions for the purpose of accurate statutory reporting and for preparing all financial statements filed with TDI. The sources in paragraphs (1) - (3) of this subsection preempt any contrary provisions in the National Association of Insurance Commissioners' (NAIC) Accounting Practices and Procedures Manual (manual).
  (1) Texas statutes;
  (2) TDI rules;
  (3) directives, instructions, and orders of the commissioner;
  (4) except as provided in the exceptions, modifications, and exemptions set forth in subsections (c) and (d) of this section, the manual;
  (5) other NAIC handbooks, manuals, and instructions adopted by TDI; and
  (6) Generally Accepted Accounting Principles.
(b) The manual described in subsection (a)(4) of this section includes the manual as amended from time to time, and all the substantive and nonsubstantive changes to the manual that have been adopted since its last publication. TDI will maintain a copy of the current manual and all substantive and nonsubstantive changes that have been adopted since the last publication for public inspection at its offices.
(c) The commissioner adopts the following exceptions and modifications to the manual:
  (1) Settlement requirements for intercompany transactions are subject to the accounting treatment in Statement of Statutory Accounting Principles (SSAP) No. 25 (previously SSAP No. 96 located in Appendix H), except that amounts owed to the reporting entity must be settled by the due date in accord with the written agreement and the requirements of §7.204 of this title. Intercompany balances must be settled within 90 days of the period for which the amounts are being billed or the balances will be nonadmitted.
  (2) Electronic machines, constituting a data processing system or systems, and operating systems software used in connection with the business of an insurance company acquired after December 31, 2000, may be admitted assets as permitted by Insurance Code §§841.004, 861.255, 862.001, and any other applicable law and must be amortized as provided by the manual.
  (3) Furniture, labor-saving devices, machines, and all other office equipment may be admitted as assets as permitted by Insurance Code §§841.004, 861.255, 862.001, and any other applicable law and, for property acquired after December 31, 2000, depreciated in full over a period not to exceed five years.
(d) A farm mutual insurance company, statewide mutual assessment company, local mutual aid association, or mutual burial association that has less than $6 million in annual direct written premiums is not required to comply with the manual.
(e) Preemptions.
  (1) Insurance Code provisions preempting any contrary provisions in the manual include: §§2551.251 - 2551.261 and 3503.202.
  (2) TDI rules preempting any contrary provisions in the manual include: §§3.1501 - 3.1505, 3.1601 - 3.1608, 3.4505(f), 3.6101, 3.6102, 3.7001 - 3.7009, 3.9101 - 3.9106, 3.9401 - 3.9404, 7.7, 7.85, and 11.803 of this title.
(f) In the event a domestic insurer or health maintenance organization desires to deviate from the accounting guidance in a Texas statute or any applicable regulation, the insurer or health maintenance organization must file a written request for a permitted accounting practice and obtain approval prior to using the accounting deviation in a financial statement. The filing must be sent to: Deputy Commissioner, Financial Regulation Division, Texas Department of Insurance, Mail Code 305-2A, P.O. Box 149104, Austin, Texas 78714-9104, at least 30 days before filing the financial statement that would be affected by the deviated accounting practice. A domestic insurer or health maintenance organization must not use a deviated accounting practice without TDI's prior approval.
(g) This section must not be construed to either broaden or restrict the authority provided under the Insurance Code to insurers or health maintenance organizations.

Source Note: The provisions of this §7.18 adopted to be effective January 1, 2001, 25 TexReg 12806; amended to be effective January 1, 2002, 26 TexReg 10897; amended to be effective January 1, 2003, 27 TexReg 12281; amended to be effective March 15, 2004, 29 TexReg 2647; amended to be effective March 7, 2005, 30 TexReg 1287; amended to be effective February 26, 2006, 31 TexReg 1035; amended to be effective October 22, 2007, 32 TexReg 7470; amended to be effective April 27, 2008, 33 TexReg 3293; amended to be effective August 6, 2009, 34 TexReg 5134; amended to be effective January 9, 2011,35 TexReg 11866; amended to be effective October 22, 2012, 37 TexReg 8329; amended to be effective February 11, 2013, 38 TexReg 661; amended to be effective December 2, 2014, 39 TexReg 9358